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Geron Corporation and Asterias Biotheraputics, Inc.
Headnote
NP 11-203 -- Relief from the prospectus requirements to allow U.S. issuer to distribute shares to investors by way of distribution in kind -- Distribution not covered by the legislative exemptions -- Each filer is a public company in the United States but is not a reporting issuer in Canada -- Each Filer has a de minimis presence in Canada -- no investment decision is required from Canadian shareholders in order to receive shares from the distribution.
Applicable Legislative Provisions
Securities Act, R.S.O. 1990, c. S.5, as am., ss. 43, 74(1),
October 1, 2013
IN THE MATTER OF
THE SECURITIES LEGISLATION OF ONTARIO
(THE “JURISDICTION”)
AND
IN THE MATTER OF
THE PROCESS FOR EXEMPTIVE RELIEF APPLICATIONS
IN MULTIPLE JURISDICTIONS
AND
IN THE MATTER OF
GERON CORPORATION (“GERON”) AND
ASTERIAS BIOTHERAPEUTICS, INC.
(“ASTERIAS” AND TOGETHER WITH GERON,
EACH A “FILER” AND COLLECTIVELY, THE “FILERS”)
DECISION
Background
The principal regulator in the Jurisdiction has received an application from the Filers for a decision under the securities legislation of the Jurisdiction of the principal regulator (the "Legislation") for an exemption from the prospectus requirements contained in the Legislation (the "Prospectus Requirements") to permit (i) the distribution of shares of Series A common stock of Asterias (the "Asterias Series A Shares") by way of a pro rata dividend in specie to holders (the "Geron Shareholders") of common shares of Geron (the "Geron Shares") who are resident in Canada (the "Geron Canadian Shareholders") (the "Share Dividend") and (ii) the distribution of warrants to purchase common shares of BioTime, Inc. (the "Contribution Warrants") by way of a pro rata dividend in specie to holders of Asterias Series A Shares (the "Asterias Series A Shareholders") who are resident in Canada (the "Asterias Series A Canadian Shareholders") (the "Warrant Dividend" and together with the Share Dividend, the "Distributions") (the "Exemption Sought").
Under the Process for Exemptive Relief Applications in Multiple Jurisdictions (for a passport application):
(a) the Ontario Securities Commission is the principal regulator for this application; and
(b) the Filers have provided notice that section 4.7(1) of Multilateral Instrument 11-102 Passport System ("MI 11-102") is intended to be relied upon in Alberta, British Columbia, Manitoba, New Brunswick, Newfoundland and Labrador, Nova Scotia, Quebec, Saskatchewan and the Northwest Territories.
Interpretation
Terms defined in National Instrument 14-101 Definitions and MI 11-102 have the same meaning if used in this decision, unless otherwise defined.
Representations
This decision is based on the following facts represented by the Filers.
Representations made by Geron
1. Geron is a Delaware biopharmaceutical corporation incorporated on November 29, 1990 developing therapies for cancer. Geron's corporate headquarters are located at 149 Commonwealth Drive, Suite 2070, Menlo Park, California, 94025, U.S.A.
2. Geron is not and has no intention of becoming a reporting issuer under the securities laws of any province or territory of Canada.
3. The Geron Shares are listed on the Nasdaq Global Stock Market ("Nasdaq") under the symbol GERN.
4. No securities of Geron are listed on any Canadian stock exchange and Geron has no intention of listing its securities on any stock exchange in Canada.
5. Pursuant to a geographical breakdown report (the "Geographical Breakdown Report") that Geron received from its transfer agent, as at May 21, 2013, there were four holders of record of Geron Shares resident in Canada holding 3,239 Geron Shares, representing approximately 0.00249% of the 129,977,878 Geron Shares issued and outstanding as at May 21, 2013.
6. Pursuant to a geographical survey report (the "Geographical Survey Report" and, together with the Geographical Breakdown Report, the "Geographical Reports") that Geron received from Broadridge Financial Solutions, Inc., as at May 21, 2013, there were 804 beneficial holders of Geron Shares resident in Canada holding approximately 1,354,344 Geron Shares, representing approximately 1.8% of the approximately 44,375 beneficial Geron Shareholders worldwide and approximately 1.04% of the 129,977,878 Geron Shares issued and outstanding as at May 21, 2013.
7. Based on the Geographical Reports, the number of registered and beneficial Geron Canadian Shareholders and the proportion of Geron Shares held by such shareholders, is de minimis.
Representations made by Asterias and BioTime
8. Asterias, formerly BioTime Acquisition Corporation, is a newly formed subsidiary of BioTime, Inc. ("BioTime") and is a Delaware corporation focused on stem cell research. Asterias was incorporated on September 24, 2012. Asterias' corporate headquarters are located at 1301 Harbor Bay Parkway, Alameda, California, 94502, U.S.A.
9. Asterias is not and has no intention of becoming a reporting issuer under the securities laws of any province or territory of Canada.
10. Asterias' securities are not listed or traded on any stock exchange or organized market place. Upon completion of the Asset Contribution Transaction (as defined below), Asterias' Series A Shares will be listed and traded on the over-the-counter market in the United States.
11. Asterias' securities are not listed on any Canadian stock exchange and Asterias has no intention of listing its securities on any stock exchange in Canada.
12. Immediately prior to the closing of the Asset Contribution Transaction, there will be (i) no Asterias Series A Shares and (ii) 51,700 Series B Shares of Asterias issued and outstanding, 50,000 of which will be held by BioTime and 1,700 of which will be held by Dr. Thomas Okarma, the Chief Executive Officer of Asterias. Dr. Okarma is resident outside of Canada.
13. BioTime is a California biotechnology corporation focused on regenerative medicine. BioTime was incorporated on November 30, 1990 and has been publicly traded since 1992. BioTime's corporate headquarters are located at 1301 Harbor Bay Parkway, Alameda, California, 94502, U.S.A.
14. BioTime's common shares ("BioTime Shares") are listed on the NYSE MKT under the ticker symbol BTX. Upon completion of the Asset Contribution Transaction, the Contribution Warrants will be listed and traded on the NYSE MKT.
15. BioTime is not and has no intention of becoming a reporting issuer under the securities laws of any province or territory of Canada.
16. As at August 7, 2013, the share capital of BioTime consisted of 57,938,220 issued and outstanding common shares, no preferred shares and 1,751,615 common share purchase warrants.
17. Pursuant to a geographical survey report that BioTime received from Shareholder Intelligence Services, LLC, as at May 31, 2013, there were 542 beneficial holders of BioTime Shares resident in Canada holding approximately 701,273 BioTime Shares, representing approximately 1.26% of the 55,746,015 BioTime Shares issued and outstanding on that date.
18. BioTime's securities are not listed on any Canadian stock exchange and BioTime has no intention of listing its securities on any stock exchange in Canada.
Joint Representations made by Geron, Asterias and BioTime Relating to the Asset Contribution Agreement
19. Pursuant to an asset contribution agreement dated January 4, 2013 among BioTime, Asterias and Geron (the "Asset Contribution Agreement"), Asterias proposes to acquire from Geron intellectual property and other assets related to one of Geron's discontinued biotechnology programs (the "Asset Contribution Transaction").
20. Pursuant to the Asset Contribution Agreement, among other things, in connection with the Asset Contribution Transaction, Asterias will issue to Geron 6,537,779 Asterias Series A Shares, which will then represent all of the issued and outstanding Asterias Series A Shares, and which, subject to applicable law and certain exceptions with respect to i) fractional shares, as described below, and ii) a jurisdiction where x) the distribution is not permitted by law or y) less than 20,000 Geron Shares in aggregate are held by residents of that jurisdiction, Geron is required to cause to be distributed to the Geron Shareholders by way of an in specie dividend on a pro rata basis as of a record date which is expected to occur as soon as practicable following the closing of the Asset Contribution Transaction.
21. A copy of the Asset Contribution Agreement was filed with the U.S. Securities and Exchange Commission (the "SEC") together with the BioTime proxy statement relating to a special meeting of the holders of BioTime Shares (the "BioTime Shareholders") held on May 21, 2013 at which the BioTime Shareholders approved (i) the issuances of securities by BioTime pursuant to the Asset Contribution Agreement, including the Contribution Warrants, and (ii) an amendment to the BioTime articles of incorporation.
22. Geron is at arm's length from each of Asterias and BioTime. There are no directors or officers in common, nor, based on public filings, are there any shareholders holding 10% or more of outstanding common stock in common, between Geron and either Asterias or BioTime, and Geron, on the one hand, and Asterias and BioTime, on the other hand, are not under common control.
23. At the time of the Share Dividend, based on the Geographical Reports, the number of registered and beneficial Geron Canadian Shareholders and the proportion of Asterias Series A Shares held by such shareholders will be de minimis.
24. Upon the closing of the Asset Contribution Transaction:
(a) BioTime will issue to Asterias 8,000,000 Contribution Warrants that Asterias is required to distribute to the Asterias Series A Shareholders by way of an in specie dividend on a pro rata basis as of a record date which is expected to occur promptly following the distribution of the Share Dividend;
(b) each Contribution Warrant entitles the holder to purchase one BioTime Share (an "Underlying Share") for an exercise price of U.S. $5 PER SHARE;
(c) the Contribution Warrants may be exercised by their holders for a period of five years from issue but may not be exercised on any day on which the closing price of a BioTime Share on the NYSE MKT is lower than the exercise price;
(d) as a result of the Asset Contribution Transaction and subject to paragraph (f) below, each Geron Canadian Shareholder will receive, on a pro rata basis, a proportion of the Asterias Series A Shares distributed by Geron to the Geron Shareholders and, in their capacity as Asterias Series A Shareholders, on a pro rata basis, a proportion of the Contribution Warrants distributed by Asterias to the Asterias Series A Shareholders;
(e) Geron Shareholders will not be required to pay any consideration for the Asterias Series A Shares received in connection with the Asset Contribution Transaction or to surrender or exchange their Geron Shares or to take any other action in order to be entitled to receive the Asterias Series A Shares in connection with the Asset Contribution Transaction; and
(f) no fractional Asterias Series A Shares or Contribution Warrants will be distributed as part of the Distributions. Instead, as soon as practicable after the Distributions, the distribution agent will aggregate all fractional shares into whole shares of Asterias Series A common stock, and all fractional Contribution Warrants into whole warrants to purchase BioTime Shares, sell such shares and warrants in the open market at prevailing market prices and distribute the aggregate net cash proceeds of these sales pro rata to each Geron Shareholder and Asterias Series A Shareholder, respectively, who otherwise would have been entitled to receive a fractional share or warrant in the Distributions.
25. The Distributions are expected to occur promptly following the closing of the Asset Contribution Transaction.
Representations made by Geron regarding the Asset Contribution Transaction
26. The distribution ratio, the record date and the payment date for the Share Dividend will be disclosed by Geron by way of news release.
27. All materials relating to the Distributions sent by or on behalf of Geron to Geron Shareholders resident in the United States will be sent concurrently to the Geron Canadian Shareholders.
28. The Share Dividend will not cancel or affect the number of outstanding Geron Shares and the Geron Shareholders will retain their Geron Share certificates, if any. The Share Dividend will occur without any investment decision on the part of the Geron Shareholders, including the Geron Canadian Shareholders. The Share Dividend does not require the Geron Shareholders' approval under applicable law.
29. Geron Shareholders are not required to vote on the Asset Contribution Transaction pursuant to legislation in Canada or the United States or any other statute governing Geron.
Representations made by Asterias and BioTime regarding the Asset Contribution Transaction
30. Immediately upon completion of the Asset Contribution Transaction and before the issuance of the Share Dividend:
(a) Geron will hold 6,537,779 Asterias Series A Shares, representing all of the issued and outstanding Asterias Series A Shares;
(b) BioTime will hold 21,823,340 Series B Shares of Asterias and will have the right to acquire an additional 3,150,000 Series B Shares upon the exercise of warrants to be issued to BioTime in the Asset Contribution Transaction;
(c) a private U.K. based investor, Romulus Films, Ltd. ("Romulus"), will hold 2,136,000 Series B Shares of Asterias and will have the right to acquire an additional 350,000 Series B Shares upon the exercise of warrants to be sold to Romulus in a concurrent private placement; and
(d) employees and directors of Asterias, all of whom are resident outside of Canada, will hold options to purchase Series B Shares of Asterias.
31. Asterias has prepared and filed with the SEC a Registration Statement on Form S-1, as amended by Amendment number 1, Amendment number 2 and Amendment number 3 to Form S-1 (which Registration Statement may be subsequently amended, restated or supplemented) in order to register the Share Dividend of the Asterias Series A Shares for distribution to the Geron Shareholders and to qualify such shares as freely tradable. The Registration Statement was declared effective by the SEC as of September 27, 2013.
32. BioTime has prepared and filed with the SEC a Registration Statement on Form S-3 (which Registration Statement may be subsequently amended, restated or supplemented) in order to register the Contribution Warrants and the Underlying Shares for distribution to Asterias Series A Shareholders and to qualify such warrants and underlying shares as freely tradable. The Registration Statement was declared effective by the SEC as of September 27, 2013.
33. The distribution ratio, the record date and the payment date for the Warrant Dividend will be disclosed by Asterias by way of news release.
34. All materials relating to the Distributions sent by or on behalf of Asterias to Geron Shareholders resident in the United States will be sent concurrently to the Geron Canadian Shareholders.
35. The Asterias Series A Shares issued to Geron will represent all of the issued and outstanding Asterias Series A Shares and approximately 21.4% of the issued and outstanding Asterias common stock on the date of the Share Dividend.
36. Asterias Series A Shareholders will not be required to pay any consideration for the Contribution Warrants received in connection with the Asset Contribution Transaction or to surrender or exchange their Asterias Series A Shares or to take any other action in order to be entitled to receive the Contribution Warrants in connection with the Asset Contribution Transaction.
37. The Warrant Dividend will not cancel or affect the number of outstanding Asterias Series A Shares and the Asterias Series A Shareholders will retain their Asterias Series A Share certificates, if any. The Warrant Dividend will occur without any investment decision on the part of the Asterias Series A Shareholders, including the Asterias Series A Canadian Shareholders. As the number of BioTime common shares issued under the Asset Contribution Transaction and issuable pursuant to the exercise of the Contribution Warrants would in aggregate exceed 20% of BioTime's then issued common shares, the approval of the BioTime Shareholders regarding the Asset Contribution Transaction and the Warrant Dividend was obtained on May 21, 2013 at a duly convened meeting of BioTime Shareholders.
38. The Geron Canadian Shareholders who receive Asterias Series A Shares pursuant to the Distributions will have the benefit of the same rights and remedies in respect of the disclosure documentation received in connection with the Distributions that are available to Geron Shareholders resident in the United States.
39. The Asterias Series A Canadian Shareholders who receive Contribution Warrants pursuant to the Distributions will have the benefit of the same rights and remedies in respect of the disclosure documentation received in connection with the Distributions that are available to Asterias Series A Shareholders resident in the United States.
40. Following the completion of the Distributions, the Geron Canadian Shareholders who receive Asterias Series A Shares pursuant to the Distributions, to the extent they continue to hold such shares, will be treated as any other Asterias Series A Shareholder and will be concurrently sent the same disclosure materials required to be sent under applicable U.S. laws that Asterias sends to Asterias Series A Shareholders in the United States.
41. Following the completion of the Distributions, the Asterias Series A Canadian Shareholders who receive Contribution Warrants pursuant to the Distributions, to the extent they continue to hold such warrants, will be treated as any other BioTime Warrant holder and will be concurrently sent the same disclosure materials required to be sent under applicable U.S. laws that BioTime sends to BioTime Warrant holders in the United States.
Joint Submissions made by Geron, Asterias and BioTime
42. The distribution by Geron of the Asterias Series A Shares and the distribution by Asterias of the Contribution Warrants and the Underlying Shares pursuant to the Asset Contribution Transaction are each a "distribution" within the meaning of such term in the Legislation and would be subject to the Prospectus Requirements.
43. Section 2.31(2) of National Instrument 45-106 -- Prospectus and Registration Exemptions ("NI 45-106") does not provide an exemption from the Prospectus Requirements for the distribution by Geron of the Asterias Series A Shares and the distribution by Asterias of the Contribution Warrants and the Underlying Shares pursuant to the Asset Contribution Transaction since each of Asterias and BioTime is not and has no intention of becoming a reporting issuer in any jurisdiction of Canada.
44. Section 2.31(1) of NI 45-106 does not provide an exemption from the Prospectus Requirements since the securities to be distributed by Geron pursuant to the Asset Contribution Transaction, the Asterias Series A Shares, are securities of Asterias and the securities to be distributed by Asterias pursuant to the Asset Contribution Transaction, the Contribution Warrants and the Underlying Shares, are securities of BioTime.
45. Section 2.11 of NI 45-106 does not provide an exemption from the Prospectus Requirements since the Distributions are not distributions of securities pursuant to an amalgamation, merger, reorganization or arrangement described in section 2.11(a) or (b) or pursuant to a dissolution or winding-up of an issuer as provided in section 2.11(c).
46. The issuance of Underlying Shares by BioTime on any exercise of a Contribution Warrant acquired pursuant to the Warrant Dividend in any of the Jurisdictions will be exempt from the Prospectus Requirements pursuant to section 2.42(1)(a) of NI 45-106.
47. In the absence of the Exemption Sought, qualification by prospectus pursuant to the Legislation of the Asterias Series A Shares to Geron Canadian Shareholders and of the Contribution Warrants to Asterias Series A Canadian Shareholders pursuant to the Distributions is not practicable, requiring that the Geron Canadian Shareholders and the Asterias Series A Canadian Shareholders be excluded from receiving the Distributions.
Decision
The principal regulator is satisfied that the decision meets the test set out in the Legislation for the principal regulator to make the decision.
The decision of the principal regulator under the Legislation is that the Exemption Sought is granted provided that the first trade in Asterias Series A Shares and Contribution Warrants acquired pursuant to the Distributions and the first trade in Underlying Shares acquired on any exercise of a Contribution Warrant will be deemed to be a distribution unless the conditions in section 2.6 or section 2.14(1) of National Instrument 45-102 -- Resale of Securities are satisfied.
"Wesley Scott"
Commissioner
Ontario Securities Commission
"Alan Lenczner"
Commissioner
Ontario Securities Commission